New #2 team in the BANKdynamics National Ranking

After reviewing my posts since January I realize that I haven’t once commented on our other major line of business BANKdynamics. Now is as good a time to start as any, perhaps even more so because last week we had a new #2 team in our National Rankings. We ran a BANKdynamics training session for Idaho state bank examiners (the group also included two examiners from Montana, and one FDIC examiner from Salt Lake City) during the second week of April in Boise. There were 17 participants total broken into 5 teams. Normally with this size group you can count on one not-so-serious and not-so-involved team; but I was surprised this time by how engaged and competitive the group was.

The winning team was named The Best Bank Ever of Idaho, “We pay you not to bank with them”. They scored a total of 907 points out of 1000, replacing the previous 2nd place team, Lost Assets Bank & Trust (who incidentally was our #1 team overall prior to December 2006). What makes their accomplishment so unique is that they did it by managing (and obtaining) their number one goal, Most Balanced Growth %. Anyone who has run BANKdynamics will tell you that there is usually too much temptation to grow the bank. Most teams typically focus on earnings goals and that usually means a race in the end for the highest ROE or Net Interest Margin. In fact in Boise the second and third place finishers (#47 & #59 overall) were doing just that: fighting for the highest ROE.

One team member told me that the temptation was certainly there. “There was an awful lot of pressure on margin as rates continued to rise. We were fighting to maintain an acceptable return level. Believe me, we ran more than a few what-ifs that blew the doors off of our balanced-growth goal…in the end I think we made the right decisions.” Obviously they were right on target; but says the bank’s president, “having balanced-growth as your number one goal just isn’t very sexy”.

The Best Bank Ever’s performance is a classic example of how managing to your goals pays off in the end. That’s the whole point of BANKdynamics: understanding how your balance sheet management decisions impact overall risk, return, capital and growth. If you set certain goals or performance targets and risk limits, then can you make decisions consistent with those goals.

Also, here’s a good laugh, the “top ten list” of quotes from the session (it always ends up being more than ten!):